Defined Benifit Plan for Physicians presentation

Copyright 2016 Dedicated Defined Benefit Services, LLC.OnePersonPlus is a registered trademark of Dedicated Defined Benefit Services, LLC.

Defined Benefit Plans for Medical ProfessionalsA Tax Strategy for Individuals with Self-Employment Income, Sole Practitioners and Small Business Owners

A Pension Plan for the Self-Employed“Solo pension plans are a great option for entrepreneurs, doctors, and real estate agents who want to slash their taxes and turbo charge retirement savings.” Kiplinger’s Retirement Report, August 2011

High-Income Clients Save More With These Underutilized Retirement Plans “From a short-term standpoint, there’s absolutely nothing that can equal this for me or anyone older with excess income and big taxes...” Financial Advisor Magazine, December 2011

How Entrepreneurs Can Get Big Tax Breaks For Retirement Savings“A 52-year-old entrepreneur netting $300,000 could use a one-person defined-benefit pension plan combined with a solo 401(k) to shelter a total of $169,800 from current income taxes…” Forbes, March 2013

Turn Self-Employment Income Into A Pension By Dec. 31 To Beat The Fiscal Cliff“If you’re self-employed, have had a good year, and want to sock away a lot for retirement, take a lead from a tax pro who advises high net worth clients, and set up a defined benefit plan by year-end.” Forbes Online, December 2012

Defined Benefit Plans – in the News

Copyright 2016 Dedicated Defined Benefit Services, LLC. 2

• Bobby Cherry• D’Arcy Wealth Management, Inc.

• Wealth Manager• 619.251.7993 or

[email protected]

Today’s Presenter

Copyright 2016 Dedicated Defined Benefit Services, LLC.

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• The Personal Pension Plan– Defined Benefit Plans At a Glance– Compared to Other Retirement Plane– The OnePersonPlus® Program from Dedicated DB

• Ideal Financial Situation

• Meeting Your Needs– Eligible Compensation– Key Dates– Fees– Opening a DB Plan– Follow through

Agenda


• Qualified retirement plan approved by the IRS

• Contributions are tax deductible

• Highest available contributions and tax deductions of any qualified retirement plan

• Contributions are based on:– Your age– Income– Years to retirement

Defined Benefit Plans at a Glance


Comparison of Retirement Plans


Defined Benefit (DB) Plans May Allow Clients to Contribute Significantly More Earned Income Than Other Retirement Plans

Hypothetical Example: Maximum annual contribution limits in 2016 for a business owner age 52, earning $265,000 W-2 income annually, retiring in 10 years

Assumes 5-7% funding rate for Defined Benefit Plans

DB + 401(k)

DB

Individual 401(k)

SEP

SIMPLE $23,450

$53,000

$59,000

$182,200

$222,100

• Goal or “benefit” represents the amount of retirement wealth the plan will provide annually at retirement age

• Benefit is established when plans are opened– Based on age, income, and years until retirement– Capped at $210,000 per year (for 2016)*

• Employer commits to achieving the goal through regular, annual contributions large enough to meet the goal

• Retirement age is typically set at age 62 or older

• Plan can be amended to change the goal

Defined Benefit Plans are Goal-oriented


OnePersonPlus from Dedicated DBA Great Tax Strategy for Clients Age 40+


• Typical Plan Sponsors– Small business owner, age 40+– Owner only, Owner + spouse or family business– Expect to contribute 5 successive years

• New Plans– Avg. annual contributions: $120,000+*– Avg. term: 8+ years– Integrates with a solo 401(k)

• Dedicated DB’s Service– Prototype plan documents eliminates cost of actuary, tax attorney– Easy to open, efficient to administer – 2-page adoption agreement, online

proposal, forms, pre-filled annual census– Set up fee and annual administration fee– No administration fees based on the size of your account

• You and Your Financial Advisor Select the Investments

* Based on 2015 first year contributions to Dedicated Defined Benefit Services DB plans

Sole Proprietor, Owner-only

• Annual earnings: $450,000• Maximum DB + 401(k) contribution for 2016: $222,100

– Contribution to DB Plan: $182,200– Contribution to 401(k): $39,900

• Annual tax savings: $84,300– Combined marginal tax rate of 38%

• DB Accumulation at age 62: $2.54 Million– 10 years, 5-7% rate of return

• Annual DB Benefit: $210,000


Dr. Charles, Age 52Wants Maximum Tax Deduction

The Impact of Age on Contribution:The Older, The Better

Doctor Charles• Age 52• 10 Years to Retirement• Compensation: $450,000• DB Contribution: $182,200• Annual Benefit at

Retirement: $210,000


Doctor Tim• Age 35• 27 Years to Retirement• Compensation: $450,000• DB Contribution: $70,600• Annual Benefit at

Retirement: $210,000

Married Business Partners,No Employees

• 5 years from retirement• W-2 Income: $530,000 ($265,000 each)• Total annual DB contribution: $426,000

– $208,000 towards Paul’s retirement– $218,000 towards Mary’s retirement

• Annual combined income tax savings: $161,800*• Accumulation at retirement:

– Paul: $1.18 Million– Mary: $1.24 Million


Paul, Age 60; Mary, Age 58

* Assumes a 38% combined marginal tax rate

Employee with Side-Income, Sole Proprietor

• Annual self-employment earnings: $100,000*• DB contribution for 2016: $80,000• Annual tax savings: $30,400

– Combined marginal tax rate of 38%• DB Accumulation at age 62: $457,400

– 5 years, 5-7% rate of return

* High 3-year average, after payment of self-employment taxes


Walter, Age 60, ProfessorIn addition to university salary, Walter has self-employment income from consulting and serving on 2 corporate boards

Owner-Only, W-2 Income Fluctuates

• 2016 W-2 earnings: $185,000• Maximum DB contribution for 2016: $136,600• + 401(k) contribution for 2016: $29,100• Total deduction in 2016: $165,700• 2016 tax savings: $62,900

– Combined marginal tax rate of 38%• DB Accumulation at age 62: $2.24 Million

– 14 years, 5-7% rate of return• Annual DB Benefit: $185,000


Kumar, Age 48, Radiologist

Eligible Compensation for a DB Plan

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Compensation Quick Reference Chart

Entity Type Source of Income Compensation for Plan

Corporation W-2 Income W-2 IncomeS-Corporation W-2 + Schedule K-1 W-2 Income only

Sole Proprietorship Schedule C (net profit) Earned Income (calculate)*Partnership Schedule K-1 (net profit) Earned Income (calculate)*

Limited Liability Company (LLC) — compensation for plan depends on how LLC is taxed. See above for partnership or corporation rules.

Employees, other than owners, are paid W-2 income for all entity types.

* Earned Income = net profit minus 1/2 self employment tax minus plan contribution. Deductions for sole proprietors and partners are limited to net profit minus 1/2 self-employment tax.

Copyright 2016 Dedicated Defined Benefit Services, LLC.

• DB Plans must be opened by the end of your client’s fiscal year, for more businesses that will be December 31st.

• The Investment Account will be opened once the Adoption Agreement is signed. If you open the plan before year end, we recommend investing no more than 50% of the assets before you have your final year-end income statement.

• The investment account must be funded when taxes are filed but no later than eight and a half months after the end of the fiscal year.

Key Dates


Fees


Defined Benefit Plan• Plan Design and Documentation Preparation Fee: $1250 for one person plan

– $250 per additional participant• Annual Administration Fee: $1950 for one person plan

(includes Form 5500, Schedule SB, and AFTAP filings)– $150 per additional participant

OR

Defined Benefit & 401(k)• Plan Design and Documentation Preparation Fee: $1450 for one person plan

– $250 per additional participant• Annual Administration Fee: $2500 for one person plan

(includes Form 5500, Schedule SB, and AFTAP filings)– $300 per additional participant

Establishing a Plan


1. We can run a feasibility proposal for you

2. Bring your accountant into the discussion early

3. Once the plan meets your objectives, we’ll complete a Plan Set-up Questionnaire

• Send signed Questionnaire to Dedicated DB

• With Plan Design and Documentation Preparation Fee

4. We’ll send you an Adoption Agreement to sign

5. You can begin to fund the investment account

Economy & Finance

Defined Benifit Plan for Physicians presentation